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By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Finance minister of Brazil, Henrique Meirelles, was quick to deny any discussion within the federal government to increase the IOF (tax over financial operations) for foreign exchange transactions. Despite the denial the U.S. dollar appreciated anyway to its highest level since January 26th.

Brasilia,Brazil's Finance Minister speaks to House Representative on Wednesday,
Brazil’s Finance Minister speaks to House Representative on Wednesday, photo by Fabio Rodrigues Pozzebom/Agência Brasil.

“There is not even a decision whether it will be necessary to raise taxes. This statement [the IOF increase] is not correct,” Meirelles told journalists as he entered Congress for a meeting, according to government news sources.

“We are still closing the budget proposal for 2017, only then will we see if any measures will be needed to meet the 2017 primary target,” added the Finance Minister.

Some local news media reported that Meirelles had said in a closed meeting during the morning that the government could raise the IOF over foreign exchange transactions to increase revenues. The news spread to the markets, where the U.S. dollar, which has been losing strength since the beginning of the year, reacted wit 1.65 percent appreciation during the day, closing at R$3.172/US$.

On Tuesday, in a meeting of the Social and Development Council, open to the press, Meirelles had said that as a last option taxes may have to be increased to guarantee the government compliance to this year’s fiscal target.

He said, “Not increasing taxes is not an ideological issue,” Meirelles had said at Tuesday’s meeting. “The fact is that [taxes] are already high, and the best solution is not to increase. But there is also the issue of prioritizing decisions.”

“If necessary, we may resort to this [increase taxes] to ensure compliance with the fiscal target. There is no ‘if’ when it comes to meeting the target. It will happen,” declared the Finance Minister.

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